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YES Bank remains in breach of its stipulated exposure limits to five groups of connected counterparties as on the date of filing of its red herring prospectus (RHP) to raise ₹15,000 crore via a further public offering (FPO).
As per the RHP, this is after considering the revised temporary applicable exposure limit of 30 per cent of the bank’s eligible capital base for a group of connected counterparties
Further, as per the RHP, the bank is in breach of exposure limits in respect of one single counterparty.
RBI guidelines
As per the Reserve Bank of India’s guidelines on large exposure (LE) framework, a bank’s exposure to a single counterparty or to a group of connected counterparties must not be higher than 20 per cent (extendable up to an additional 5 per cent) and 25 per cent of its available eligible capital base, respectively.
As per the aforementioned framework, the applicable single counterparty LE limits for YES Bank as on March 31 amounted to ₹3,103 crore, and the applicable group counterparty LE limits for the bank as on March 31amounted to ₹3,879 crore
The RBI, through its May 23notification, has permitted banks to increase their exposure to a group of connected counterparties to 30 per cent from 25 per cent of their eligible capital base, with the increased limit applicable up to June 30, 2021.
Detailed course of action
The bank said it continues to keep the RBI informed on the status of the breaches and the detailed course of action towards regularising these breaches.
“There can be no assurance that we will not be subject to adverse actions by the RBI, which may affect our business, financial condition, results of operations and prospect,” as per the RHP.
As the average size of corporate loans in its loan portfolio is substantially larger than the average size of retail loans, the bank cautioned that any major default in the corporate loan portfolio could significantly impact its overall portfolio of assets.
“Moreover,...the potential risk is increased by large loans making up a large portion of our portfolio. Although we are in the process of rebalancing our portfolio for less corporate loans in favour of more retail loans in order to diversify, there can be no assurance that we will complete this process in a timely manner, or at all,” the bank said.
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